If you didn’t get a chance to catch the live broadcast this morning, please click here to see the replay.
Today’s appearance was pretty short, but still worth the free PR it provides once every quarter or so. The Broadleaf background is new and must have helped as I had several emails from strangers on my Blackberry afterwards. I’d guess our website hits went up as well.
When preparing for these, we usually submit “talking points” ahead of time that the anchors can use, but you really never know what will transpire, so you have to be quick on your feet and always ready to run with whatever they throw your way.
For interest’s sake, these are the “talking points” I submitted ahead of today’s appearance. (Please keep in mind that these are our best investment opinions and are published for educational purposes. Any investor who acts on these thoughts does so purely of their own accord. We also have no obligation to update our thoughts and opinions as they change.)
1.) What are you telling clients right now?
In a recent update, we encouraged contacts to “GET IN THE GAME“.
The tone of THIRD QUARTER EARNINGS CALL which will begin in another month or so SHOULD MOVE BEYOND THE “LESS BAD” CATEGORIZATION AND INTO THE “BETTER” CATEGORY.
While we have had a strong run off the lows in the market, THE YEAR TO DATE GAIN OF 20% FOR THE S&P 500 IS STILL SUBPAR BY HISTORICAL STANDARDS OF RECOVERY. An additional 10% upside to 1150-1200 by year end would still only make this year’s stock market recovery an average one for a recovery year. Given that the decline was of an historical magnitude, the surprise could be to the upside.
THE RALLY OFF THE LOWS HAS BEEN TEXTBOOK so far, with cyclicals leading the way over defensives.
2.) What sectors or stocks do we like?
We still have a PREFERENCE FOR CYCLICALS OVER DEFENSIVES. BUT we are now beginning to fade early cyclicals like the consumer discretionary sector in favor of later stage cyclicals like the industrials.
INNOVATION PLAYS ARE WORTH INVESTING IN PARTICULARLY AT THIS STAGE IN THE CYCLE. Why? Companies aren’t just investing in new technologies because it’s cool, but because productivity gains are paramount and corporate cultures are much more accepting of necessary change. Think TECHNOLOGY and certain areas of HEALTH CARE.
3.) What sectors or stocks we would avoid?
I still believe DEFENSIVE SECTORS of the market will likely continue to lag, WHICH LEADS US TO BE UNDERWEIGHT UTILITIES, TRADITIONAL HEALTH CARE AND STAPLES. At the same time, these areas have woefully underfperformed and MAY REPRESENT GOOD VALUE FOR MORE PATIENT INVESTORS.
I am SKEPTICAL OF GOLD EVEN THOUGH IT IS ALL THE RAGE RIGHT NOW. At a recent lunch of institutional investors, gold was by far the favored asset class for outperformance this year. Contrarians beware…many of these same folks were extraordinarily bearish on stocks six months ago, particularly the consumer discretionary sector, which has been among this year’s top performing areas. When fund flows go gaga over an asset class, it is often time to lighten up even if the fundamentals look great. And in this case, I’M NOT SO SURE THE FUNDAMENTAL CASE FOR GOLD IS ALL THAT COMPELLING. (Typically gold does well in inflationary and deflationary environments, but has little intrinsic value other than for jewelers and to an increasingly less extent dentists. In the see saw debate between extreme inflation and deflation, reality may lie somewhere in the middle.)
4.) Other thoughts worth addressing?
EVERYONE IS BEARISH ON THE DOLLAR given its recent underperformance. MY INTERPRETATION IS DIFFERENT AND PERHAPS WORTH AIRING. THE DOLLAR IS NOT WEAK BECAUSE THE U.S. IS IN SECULAR DECLINE, BUT SIMPLY BECAUSE MANY FOREIGN ECONOMIES ARE GROWING FASTER – AT LEAST FOR THE MOMENT.